Downward Revisions at the National Association of Realtors

Several people have asked me about the new s that the National Association of Realtors (NAR) are revising down their estimates of existing home sales over the last 4 years by an average of 14 percent. I have not looked at this issue in great detail, but the NAR explanation does seem plausible on its face.

Their story is that they rely on data from realtor sales for most of their estimate and then impute a fixed percentage for owner sold properties. In principle, they should also remove new homes that were sold by realtors. (These are not existing homes.) It seems that their survey was in fact capturing a larger portion of total sales since fewer people were selling homes on their own and builders were increasingly turning to realtors to sell new homes.

There were some people who had raised issues about the data previously, but it is time consuming and expensive to re-benchmark a survey. It is understandable that the NAR would not have done it sooner, although they could have made more of a point of noting some of the issues that had been raised about the survey's accuracy.

This sort of problem arises in other contexts. John Schmitt, my colleague at CEPR, found evidence that the Current Population Survey (CPS), which provides the basis for the monthly employment report, was overstating employment. This is due to the fact that it is covering a smaller share of the population than it did three decades ago. A comparison of the CPS with the 2000 Census data indicated that the people who are excluded from the survey are less likely to be employed than the people who are covered. This effect was especially large for young African American men. The CPS may overstate employment by this group by as much as 8 percentage points.

As a more general point, reporters should know that comments from the NAR, or any trade association, must be taken with a grain of salt. While its survey may in general be credible, its economists are not paid to give information to the public. They are paid to advance the interests of its members. In the case of the NAR, this means selling houses. It was absurd that David Lereah, then the chief economist of the NAR, was the primary and often only source in stories on the housing market during the bubble years. Remarkably, reporters tend to treat his successor, Lawrence Yun, the same way.